The stock market flashed a bullish technical signal as it climbed out of a hole in Monday’s trading session.
After tumbling early in the day as traders eyed the upcoming April 2 tariffs, stocks staged a rebound, with the S&P 500 rising slightly after falling more than 1.5%.
The turnaround marked the early sign of a double bottom, a bullish technical pattern describing a series of declines and rebounds in the price of a security.
The pattern typically marks the end of a downtrend and the beginning of a new uptrend.
According to Craig Johnson, chief market technician at Piper Sandler, a double bottom could be forming in the S&P 500, with the second bottom seen in Monday’s session.
The S&P 500 hit a low of around 5,500, around the same level it bottomed out at on March 13. The stock market has since recovered, with the S&P 500 erasing its 1.7% loss on Monday and trading into the green at 5,586 at 2:29 p.m.
The trading activity signals to Johnson that stocks could be setting up for a reprieve heading into the seasonally bullish month of April.
“With total weekly trading volume tapering off below its 10-week average, it feels more like just a ‘half-court press,’ with investors awaiting the tariff announcement on April 2,” Johnson wrote in a note on Monday.
Johnson said the technical evidence “still suggests this is an intermediate-term, tradeable low, possibly for a ‘double bottom.'”
Last week’s trading volume, as measured by total exchange volume across the NYSE, Nasdaq, and American Exchange, was at the lowest level since the week ended January 14.
“This suggests that last week’s decline in the stock market was likely due to stocks falling on their own weight rather than aggressive distribution by investors,” Johnson said, adding that a “volume divergence will be bullish for stocks.”
The low trading volume makes sense, according to Johnson, who argued that investors are in “wait and see mode” until the April 2 tariff deadline.
That day could ultimately be an uncertainty-clearing event that could spark investors to jump back into stocks, driving prices higher.
Bullish seasonality in April
Johnson also highlighted that a bounce in the market would make sense given the timing, as April tends to be a bullish month for the stock market.
Since 1928, the S&P 500 finished the month of April in positive territory 65% of the time. And when returns are positive in April, they’re typically strong.
According to Johnson, when returns were positive during the month, they historically averaged 4.1%.
Piper Sandler
